Join me, along with co-presenters Daniel Garrie of Law and Forensics and Jessica Friedman of JP Morgan Chase, for a recorded CLE webinar offering an update on the New York State Department of Financial Services’ cybersecurity regulations, which are designed to combat the growing threat cyber threats pose to information and financial systems. The regulations impose cybersecurity requirements on covered financial institutions and create a set of rules for developing and implementing cybersecurity programs.

The webinar: A Look at NYDFYS Regulations ― Two Years In, will cover:

1. Overview of the statute

2. Threats Facing Financial Institutions

3. What’s Ahead in 2020

The firm has been provided with a limited number of complimentary viewings.

Contact me at ebadway@foxrothschild.com to receive a complimentary viewing code while they last.

Compliance personnel– especially, chief compliance officers– cannot ignore problems because, as one  SEC ALJ determined, it will lead to censure and fines for ignoring compliance obligations.  See    https://www.sec.gov/alj/aljdec/2020/id1400cff.pdf.

Apparently, for over 10 years, a registered investment advisor hired a series of unskilled CCOs, and ignored compliance and audit requirements.  The RIA tried to claim that it had remedied the problems.  The  ALJ did not issue a cease and desist order or independent compliance monitor because it seemed the RIA was now in compliance, but the ALJ, instead, determined that it was wholly reckless in not educating itself over compliance issues.  Thus, the ALJ found the RIA was subject to censure and fines.

This case exemplifies how important it is to obtain counsel to assist in ensuring the firm follows all of the compliance rules and requirements.  Hiring untrained or unsophisticated personnel, although not prohibited, only heightens the need for counsel to be consulted and involved in the firm’s compliance program.

The SEC recently brought and settled an action against a former wannabe fund manager, who lied to prospective investors that he already had raised millions of dollars in the fund from other (fictitious) investors.  The fund manager was barred from the securities industry for 10 years.  See  https://www.sec.gov/litigation/litreleases/2020/lr24783.htm.

The SEC also claimed that the fund manager used various social media when discussing this investment, The fund manager was also alleged to have mislead investors regarding the underlying investments and returns as well.  It would appear that the fund manager was not successful in obtaining any actual funds, however.

Although lying to investors will always get you into trouble, this case is really a lesson for all those seeking entry into the hedge/private equity fund business.  The lesson is you simply cannot make up your support or past, and how critical is to retain competent counsel to assist you in the endeavor.

Please join Fox Rothschild LLP’s Security Industry Group members, Patrick Egan and Chuck DeMonaco, for a timely discussion on insider trading and the effect of the pandemic on those investigations.  Kindly join us

 

It’s All in the Timing: Insider Trading Investigations and National Emergencies

Complimentary Webinar
Thursday, April 16, 2020 | 2 pm ET

The declaration of a national emergency can trigger insider trading inquiries focused on the owners of a stock portfolio, 401(k) plan or brokerage account if they sold before or after the emergency was declared.

Join Patrick Egan and Chuck DeMonaco for practical guidance on how to respond when confronted with questions from investigators and an outline of the process such investigations follow.

Fox uses WebEx technology for webinars. New to WebEx? Click here to join a test meeting. We recommend using the computer audio option.

 

www.foxrothschild.com        

 

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Copyright © 2020 Fox Rothschild LLP. Fox Rothschild LLP is a Pennsylvania Limited Liability Partnership. The material contained in this document has been authored or gathered by Fox Rothschild for informational purposes only. This document is not intended to be and is not considered to be legal advice. Transmission of this document is not intended to create, and receipt does not establish, an attorney-client relationship. Legal advice of any nature should be sought from legal counsel.

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We wanted to invite everyone to attend the below webinar:

 

Ensuring Business Continuity During the Coronavirus Crisis

Complimentary Webinar
Thursday, April 9, 2020 | 2 p.m. ET

Join Joshua Horn, Fox Rothschild LLP; Ernie Badway, Fox Rothschild LLP; and David Zack, R. Seelaus for an informative discussion of how companies in the securities industry should prepare to effectuate business continuity policies during times of crisis, with a particular focus on the coronavirus and responding in the midst of an ongoing, widespread and unpredictable event that is impacting business operations on a global scale.

 

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Copyright © 2020 Fox Rothschild LLP. Fox Rothschild LLP is a Pennsylvania Limited Liability Partnership. The material contained in this document has been authored or gathered by Fox Rothschild for informational purposes only. This document is not intended to be and is not considered to be legal advice. Transmission of this document is not intended to create, and receipt does not establish, an attorney-client relationship. Legal advice of any nature should be sought from legal counsel.

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Unfortunately, in a very short sighted move by the United States Securities and Exchange Commission, its Chairman Jay Clayton announced that the SEC would not extend the compliance date for Regulation BI and the use of Form CRS passed the deadline of June 30, 2020.

Apparently, Chairman Clayton has not seen the recent Covid-19 numbers as well as the fact most broker-dealers have employees working from home.  Instead, he stated that the SEC’s Office of Compliance Inspections and Examinations as well as FINRA are finalizing plans for examinations to take place (we suppose the exams will be virtual given the stay at home orders), and that, in his humble opinion, firms are well on their way to ensuring compliance.  Essentially, why stop the bus now since it is already on route to its destination.

Sadly, in this trying time, firms are going to have continue to dedicate resources when many have been working remotely to keep their businesses afloat.  Of course, counsel is here to assist these firms in ensuring compliance with Regulation BI and the preparation of Form CRS.

A few weeks ago as this crisis began to take shape, we indicated it would be a good idea to dust off the old business interruption policies.  In response to some queries, we wanted to add to our discussion.

Regardless of anyone’s (including your insurance broker) belief, you should still make the claim on the policy.  There are a number of factors at play, including, but not definitively, some form of government intervention to cover these losses.  It would be critical to get those claims on file as soon as possible.

Of course, counsel is always a good place to start.  Please take care and stay safe and healthy.

With the chaos of the past week– and it is going to get worse before better– firms should check on their insurance coverage.

Most firms should check to see if there business interruption coverage is up to date.   This is a critical component of their business operations.  If things get worse and there are widespread shutdowns, most firms will need to look to these policies for coverage.   Keep in mind that it may apply if you cannot get into your offices or vendors or suppliers let you down.  You will need to make sure you keep detailed records of expenses and provide prompt notice to your insurance carrier if something happens.

Best way to make sure that you are on the right track is to call counsel and discuss.

Let’s be honest, the only people usually concerned about business continuity plans (“BCP”) are compliance folks and the lawyers.  In fact, many probably have not looked at their BCP since Hurricane Sandy.  Well, you better dust it off (or dry it off, more accurately).

FINRA has already provided notice regarding traders working at home.  https://www.bloomberg.com/news/articles/2020-03-09/finra-concedes-virus-may-impact-wall-street-oversight-of-traders.  Further, nearly everyone, who works at the SEC headquarters in Washington, D.C., has been sent home because a staff member tested positive for the coronavirus.   However, don’t get to happy about the SEC dispersion, staff members are still working around the country and from home.

In any event, firms need to start preparing and considering implementing their business continuity plans before it is too late.  Focus on the key functions: personnel, IT, and supervision.   Do your best, and remember legal counsel is there to assist.

Alas, the market crashes (nearly, 8% of its value today) and your 401k plan is devastated, but could it get worse?  Of course, it could.  Brokers and investment advisers as well as their employers should expect to see numerous arbitrations and lawsuits as a result of the market crash and volatility.

As a result, brokers and investment advisers should take precautions now.  Customer client files should be in order.  That means, you have to make sure the files have been properly reviewed and all the appropriate documentation is contained in the file.  Further, when there have been prior market crashes, it sometimes makes prior illegal activities, such as Ponzi schemes, come to light.  Compliance personnel must be vigilant to these matters.

With the market volatility, it is important to start the preparation for litigation now.  Consult with counsel and you will–hopefully- be able to weather the storm.